EMC, IBM Reportedly Pursue Cloud Supplier SoftLayer

Dallas-based SoftLayer has become an acquisition target; its cloud technology could help EMC or IBM compete with Amazon Web Services.

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Two industry giants looking to become larger during the cloud era are in talks with Dallas-based cloud services provider, SoftLayer, to see whether they will add its specialized services to their product line-ups.

IBM and storage supplier EMC, owner of VMware, are the interested parties. SoftLayer has retained Morgan Stanley and Credit Suisse to manage the sale, if it comes about, according to Reuters Friday. AT&T expressed interested in SoftLayer before the current talks but is no longer pursuing the acquisition, the report said.

SoftLayer has built up a substantial base of 25,000 small, medium-size and large customers, in part by simplifying a customer's ability to go from virtualized servers to bare metal servers and back again. The charges are different, but SoftLayer handles the accounting, while reducing the transitions to clicking on a destination-server type at the start of the process.

In most cloud settings, a customer would have to decommission a running virtual server, then build a new application and operating system targeted for a bare-metal server. The SoftLayer approach better parallels the experience of data center managers who sometimes shift their workloads between bare metal and virtualized servers.

To accomplish the virtual-to-physical shift, SoftLayer has had to build systems that juggle device drivers in operating systems and produce the correct application-operating system combination for each destination. It does so by maintaining a library of a customer's workloads, with a root copy of each that can be geared for either physical or virtual operations. The system is called Flex Images.

Neither IBM nor EMC would comment on a potential acquisition, and SoftLayer declined to respond to an InformationWeek inquiry.

Such an acquisition might set the buyer back as much as $2 billion, the investment community familiar with the talks, told Reuters.

Such an acquisition would give IBM a set of x86-based data centers and customers, including many small business customers, that it might prefer to buy as opposed to build up on its own.

For EMC, it would give its VMware subsidiary an experienced cloud services provider with which to build out its own version of a public cloud. VMware CEO Pat Gelsinger in a set of comments at his firm's Partner Exchange in Las Vegas signaled a determination to keep VMware virtualization customers in the fold once they were ready to start shipping workloads to the cloud. It has major partners, such as Colt in Europe, Singtel and Softbank in Asia, and CSC, Dell and Bluelock in the United States, and legions of small, regional partners.

But that might not be enough to match the momentum Amazon Web Services is building up as the market leader in public cloud services. Amazon continues to invest heavily in infrastructure, foregoing profits, and traditional IT vendors can only look on in alarm as they see a next-generation market moving toward the camp of the newcomer.

VMware's COO Carl Eschenbach summed it up best at the partners' conference: "I find it really hard to believe that we cannot collectively beat a company that sells books."
The problem is, Amazon.com has proven adept at selling more than books, and VMware's parent company is shopping for a service that might become part of VMware's badly needed answer to the bookseller.

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